The Government Accountability Office has a report out on the financial services bailout law and the Troubled Asset Relief Program, or “TARP.”

As of January 23, the Treasury Department has disbursed about $293.7 billion, mostly to purchase preferred shares of 317 financial institutions. That’s a bit over $3,000 per U.S. family, just shy of $1,000 per person.

As we noted here before, the TARP program was supposed to be about buying troubled mortgage assets, but ended up as investments in financial institutions.

The GAO’s focus is on oversight and transparency, and it says – check out this government-speak:

Treasury has continued to develop a system for detecting noncompliance with key requirements of the program but has not yet finalized its plans. Further, Treasury has made limited progress in formatting articulating and communicating an overall strategy for TARP, continuing to respond to institution- and industry-specific needs by, for example, making further capital purchases and offering loans to the automobile industry. In addition, it has not yet developed a strategic approach to explain how its various programs work together to fulfill TARP’s purposes or how it will use the remaining TARP funds. While GAO does not question the need for swift responses in the current economic environment, the lack of a clearly articulated vision has complicated Treasury’s ability to effectively communicate to Congress, the financial markets, and the public on the benefits of TARP and has limited its ability to identify personnel needs.

Rough translation: “These guys are building a plane in flight. Maybe they crash. Maybe they don’t.”

But here’s a timeline of what’s gone on so far in the bailout. Put on your spectacles:

Cost estimates for bills on the floor this week have been published and incorporated into our database.

H.R. 384, the TARP Reform and Accountability Act of 2009, saves the average U.S. family a little over $80. (Which is nice until you realize that the legislation creating the Troubled Assets Relief Program cost almost $3,000.)

It was debated some on Wednesday (1/14) and will get a vote very soon.

H.R. 2, the Children’s Health Insurance Program Reauthorization Act of 2009, costs just shy of $2,000 per U.S. family.

It passed the House Wednesday. Take a look at the roll call vote on passage if you want to see how your representative voted.

“[T]roubled assets from any financial institution.” That’s what the financial services bailout bill allowed the Treasury Department to buy: “troubled assets from any financial institution.” They were talking about bad mortgages.

But then the money got used to buy pieces of financial institutions themselves. Some Members of Congress raised a stink when word circulated that the money would be used to pay dividends – because it wasn’t their preferred violation of the terms of the bailout law.

Now the talk is of using the money to give loans to automakers.

Let’s take a look at what the law said again:

“The Secretary [of the Treasury] is authorized to establish the Troubled Asset Relief Program (or ‘TARP’) to purchase, and to make and fund commitments to purchase, troubled assets from any financial institution . . . .”

Now, it’s true – Congress left the definitions wiiiide open:

The term ‘troubled assets’ means–

(A) residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before March 14, 2008, the purchase of which the Secretary determines promotes financial market stability; and

(B) any other financial instrument that the Secretary, after consultation with the Chairman of the Board of Governors of the Federal Reserve System, determines the purchase of which is necessary to promote financial market stability, but only upon transmittal of such determination, in writing, to the appropriate committees of Congress.

But do you think that loaning money to automakers is a “purchase” of a “financial instrument”? Well, that’s a small hurdle. The Treasury Secretary can structure the loan to look like the purchase of a financial instrument, and voila.

I was a little hesitant when I wrote this post back in early November to call the $700 billion in bailout money a “slush fund.” But it appears now quite clearly to be a slush fund.

It’s a slush fund, a slush fund, a slush fund. Congress and the Administration passed themselves a law to create a slush fund. Now they’re debating how to dip into this slush fund.

I repeat: It’s a slush fund.

I continue to be impressed by the number of bills being introduced to amend the big financial services bailout program known as the “Troubled Asset Relief Program,” or “TARP.”

We discussed some of this earlier in a post called “Ready, Vote, DEBATE!” But here are all the current bills that have “Troubled Asset Relief Program” in the title.

It looks like Congress just plain forgot to have a Special Inspector General for the TARP. “Oopsie daisies! We were so busy spending 700 billion dollars that we forgot!”

Many more bills deal with the program. These are just the ones with “Troubled Asset Relief Program” in the title:

S. 3683, A bill to amend the Emergency Economic Stabilization Act to require approval by the Congress for certain expenditures for the Troubled Asset Relief Program

S. 3697, A bill to amend the Emergency Economic Stabilization Act to require approval by the Congress for certain expenditures for the Troubled Asset Relief Program

S. 18, The Troubled Asset Relief Program Inspector General Improvement Act

S. 3716, The Special Inspector General for the Troubled Asset Relief Program Act of 2008

H.R. 7333, The Special Inspector General for the Troubled Asset Relief Program Act of 2008

H.R. 7334, To amend the Federal Deposit Insurance Act to require each insured depository institution which receives an investment or other assistance under the Troubled Assets Relief Program to include in the quarterly call report the amount of any increase in new lending that is attributable to such investment or assistance, and for other purposes

S. 3731, The Special Inspector General for the Troubled Asset Relief Program Act of 2008

Here’s something interesting to note from the raft of bills introduced when Congress returned briefly after the election: A bunch of ‘em were about the financial services bailout. Mostly in the Senate, but with a few examples in the House, bills were introduced to manage how the bailout would work.

Here’s the problem with that: The bailout bill already passed. It’s not in Congress’ control any more. Any bills introduced to affect the bailout amount to trying to lick up spilled milk. Congress is supposed to debate legislation before it passes, not after.

So let’s take a look at the bills and the Senators and Members of Congress who introduced them.

It’s most interesting to see who voted for the bailout, but came up with ideas for how it should work later. That amounts to a confession of voting for a bill without thinking it all the way through, a big no-no when $700 billion in taxpayer money is on the line.

Here are the post-bailout bailout bills, with their sponsors:

(more…)

The Drudge Report linked to a very disturbing bailout news story yesterday, claiming that the “U.S. government is prepared to provide more than $7.76 trillion on behalf of American taxpayers” toward rescuing the financial services sector.

That’s about $80,000 per U.S. family, or $25,000 per person (if we’re talking about 2009 expenditures).

Except . . . the story doesn’t explain what kind of outlays these are or where these figures come from.

The unprecedented pledge of funds includes $3.18 trillion already tapped by financial institutions in the biggest response to an economic emergency since the New Deal of the 1930s, according to data compiled by Bloomberg.

“Tapped” is not a financial term of art, of course, and what “data” did Bloomberg compile?

One suspects that this might be loan guarantees of some kind, with the total amount being lent in the $7.7 trillion range, but this does not mean that $7.7 trillion is going to be spent.

It’s all quite fishy.

The “TARP” program in the bailout bill (”Troubled Asset Relief Program”) – this money might well be spent, and I predicted as much when the whole bailout process began – but loan guarantees are a different thing.

Without better reporting, I don’t find the Bloomberg story credible or useful. So relax folks! It may not be tens of thousands spent on your behalf. But it could be. We’ll keep watching . . . .

Six weeks since Congress approved the financial services bailout legislation, the administration has committed $290 billion of the $700 billion Congress gave it to work with.

Originally intended for purchasing troubled mortgage assets, it has instead been used to purchase shares of troubled firms, and it may soon be used for automakers and heaven knows what else.

Now the Washington Post reports:

Yet for all this activity, no formal action has been taken to fill the independent oversight posts established by Congress when it approved the bailout to prevent corruption and government waste. Nor has the first monitoring report required by lawmakers been completed, though the initial deadline has passed.

“It’s a mess,” said Eric M. Thorson, the Treasury Department’s inspector general, who has been working to oversee the bailout program until the newly created position of special inspector general is filled. “I don’t think anyone understands right now how we’re going to do proper oversight of this thing.”

We already know that the Treasury Department has been working to obscure what it’s doing.

Congress is asleep at the switch, and the “oversight” procedures put into the bailout bill have proved to be a paper tiger.

The U.S. government is modifying its rescue of troubled insurer AIG so that it will take $40 billion in stock. Meaning: Your investment in AIG is about $130. The average U.S. family is invested to the tune of about $400.

That’s in addition to the $1,000-per-family plunked down earlier on financial services companies.

Voters took a scythe to the Members of Congress who switched their votes to pass the financial services bailout legislation in October and those whose votes in 2000 set the stage for the financial crisis.

Except . . . it was a very dull scythe. Maybe one without a blade.

Of the 59 people featured in our Bailout Rogues Gallery – Members of Congress who switched their votes between Monday and Friday of the same week to pass the bailout legislation – 57 ran for reelection and 55 won. That’s a retention rate of about 96.5% – pretty much exactly in line with historical retention rates. So you people must not have been very mad about that.

As to the Members of Congress and Senators who voted to do away with state regulation on financial derivatives, the story is about the same in the Senate. Eighteen of 20 running were reelected, a 90% retention rate.

But it’s a little different in the House. One hundred forty-three in this bunch ran for reelection and 135 of them won. This is a retention rate of 94.4% – at the low end of recent historical averages. If you count the three Members of Congress who ran for Senate and lost, the rate drops to 92.5%.

All of these numbers are probably statistically insignificant, so there’s nothing to see here. What this illustrates is how insulated Members of Congress and Senators are, even in elections. You vote based on lots of things, and one or two particular votes – even coming near election time – are unlikely to dislodge all the other reasons we choose one candidate over another.

That’s why – broken record – it’s important to monitor events between elections. Watch the bills that come to the House and Senate floors and let your representatives know what you think.

Make no mistake, if banks were to use bailout money to pay dividends, it would be an offense to the taxpayers who thought their money was going to be used for lending. And House Financial Services Committee Chairman Barney Frank (D-MA) is right to object to that possibility.

But the statement he released Friday is just a little too ironic to go without mention. “Any use of the these [sic] funds for any purpose other than lending—for bonuses, for severance pay, for dividends, for acquisitions of other institutions, etc.,” says the Chairman, “is a violation of the terms of the Act.”

A violation of the terms of the Act, huh?

Y’know, the Troubled Asset Relief Program was created “to purchase, and to make and fund commitments to purchase, troubled assets from any financial institution.” But, right after the law passed, the administration turned on its heel and started buying pieces of the financial institutions themselves. This was an offense to the taxpayers who thought their money was going to be used for buying troubled mortgage assets.

It’s hard to find Chairman Frank’s objection to this violation of the Act. Some of his thinking was captured in a CNN.com article:

Rep. Barney Frank of Massachusetts, the Democratic chairman of the House Financial Services Committee, also backed the plan to buy equity in banks, saying it was “conceptually easier” than implementing the government plan to buy off bad mortgage-backed securities.

I guess some violations of the Act are better than others.

How come government officials get to bend the bailout law, but banks don’t? Such is the nature of power, I guess.

Again, I’m not in favor of banks using these funds for dividends. But I’m a fan of irony, and an opponent of hypocrisy, which we seem to be seeing here. The $700 billion of our money that Congress committed to this bailout is little more than a slush fund.